Shillings and Sense

Loans are financial transactions where one party, typically a financial institution or lender, provides money or assets to another party, known as the borrower, with the expectation that the borrowed amount will be repaid over time, usually with interest.

Are loans necessary? Well yes! Loans provide access to funds that individuals and businesses may not have readily available. Whether it’s to finance a home purchase, start a business, or invest in education, loans enable individuals and businesses to access the capital they need to pursue their goals and aspirations. Perhaps there’s an unexpected financial hardship or emergency, such as a medical expense or a major repair, but loans can provide a lifeline to individuals and businesses facing immediate financial needs. More importantly, responsible borrowing and timely repayment of loans can help individuals and businesses establish and build a credit history, which is essential for accessing future financing opportunities at favorable terms.

How will a loan affect me? One of the primary effects of a loan is that it provides immediate access to funds that the borrower may not have had otherwise. Taking out a loan means borrowing money that will need to be repaid over time, usually with interest. As a result, the borrower incurs debt, which adds to their overall financial obligations.

To/ Not to take a loan? Either requires strict consideration of one’s current financial situation, including income, expenses, savings, and existing debt. Determine if taking on additional debt through a loan is manageable given your income and financial obligations. Secondly, consider the purpose of the loan and whether it aligns with your financial goals. Thirdly, evaluate interest rates, fees, and terms of the loan to understand the total cost of borrowing. Last but certainly not least explore alternative sources of funding or financial solutions, such as savings, investments, grants, or assistance programs, before resorting to borrowing then make a decision that will yield the best financial results considering now and in the future.